On-screen text:
To hike or not?
Fed decision week
Energy inflation risks rise
Listen for the hawks
Narrator: To hike or not to hike?
So the Federal Reserve meets this week and is going to make the decision if they want to hike rates or not.
Now we really have to pay attention to both sides of their mandate at this stage, because if you look on the employment side of things, the labor market still looks relatively stable. You have initial jobless claims that recently hit their lowest since 1969, but you also have the unemployment rate that has remained low and has actually ticked down just a little bit in the past several months.
Combined with nonfarm payroll growth, that still looks relatively steady.
Animation: Chart showing recessions appearing in 1969, 1975, 1981, 1983, 1991, 2001, 2008, and 2020 versus weekly initial jobless claims, which spiked during those periods.
Narrator: When you look at the inflation side of things, that's, of course, where a lot of the problems are. Not only has the Fed's inflation target not been met for five years now, but when you think about this recent flaring up in Middle East tensions and the fact that energy prices have risen again, it sort of cancels out the impact that we saw in the June CPI report, where most of the decline was driven by that significant rolling over in gasoline prices.
Animation: Chart showing the PCE price index year over year hovering above and below 2% from 2016 to 2020 and then rising to 7% in 2022, then dipping to between 2% to 3% in the following years before moving to about 4% more recently.
Narrator: So the question now moving forward for the Fed, at least, is given they look more at core measures of inflation as opposed to headline, does the pressure from energy prices and their recent increase start to spread throughout the rest of the economy and the rest of the inflation metrics?
So that's what we need to keep in mind when we listen to officials who haven't already come out and talked about how inflation is more of an issue, and the Fed needs to start thinking about raising rates.